Read this in The Manila Times digital edition.
MY first column this year talked about reviewing and updating the insurance protection of our properties, especially the covers for natural perils, which cannot be predicted when they will happen. But when they do, they can cause a lot of damage, which requires huge sums of money for repairs and restoration. The insurance industry has been exerting a lot of effort to reduce the cost of these insurance covers so everyone can get adequate protection. What is not controllable, however, are the taxes that are levied on insurance. I am not referring to the income tax on net income, which is similar to the income taxes paid by other corporations. These are the tax on premiums, value-added tax, documentary stamp tax, local government tax and more. The cost of insurance or premiums is increased by 27.5 percent by these taxes. Insurance can be more affordable if these taxes are reduced.
The good news is that our legislators are now reviewing the petitions submitted by the insurance industry to rationalize the taxes imposed on property insurance and other policies. There is a pending bill to reduce the documentary stamp taxes from its present rate of 12.5 percent gradually to 7.5 percent by the year 2027. The non-life companies were hoping that the final rate would have been 3 percent but welcomed the reduction just the same. To illustrate, if one has to pay a P30,000 insurance premium on his property or vehicle, the documentary stamp tax is P3,750, which will go down to P2,250, or P1,500 less. This tax, which is charged to the policyholder, will be remitted to the BIR by the insurance company. Since it is a tax on documents, the tax is considered paid even if the policy is canceled or destroyed.
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